Econ unit 12, chapter 14

In third-degree price discrimination, the firm will charge the less elastic submarket _____ price than the more elastic submarket.

A higher

For profit maximization in a multi-product firm, the marginal revenue must be equal to the marginal costs for _____ sold.

All products

An example of first-degree price discrimination is _____.

An auction

When setting two-part pricing for consumers who are identical, the access fee should be set at the area of the triangle _____.

Below demand and above marginal cost

When setting two-part pricing for two groups of consumers with different demand, the access fee should be set at the area of the triangle _____.

Below demand and above marginal cost for the consumer with the lowest demand

_____ occurs when a firm groups two or more products together and sells them for one price

Bundling

The purpose is price discrimination is to _____.

Capture consumer surplus

When a firm with market power changes the same price for all units sold, the firm _____.

Captures the same consumer surplus from each unit

To capture all the consumer surplus from customers, firms with market power must _____.

Charge the demand price for every unit sold

The method of determining price by setting price equal to average total cost plus a portion of average total cost is called ______.

Cost-plus pricing

_____ occurs when a firm offers quantity discounts over successive blocks of quantities purchased.

Declining block pricing

Third-degree price discrimination occurs when _____.

Different groups of customers are charged different prices

Select all that apply: Theoretical problems associated with cost-plus pricing include that cost-plus pricing _____.

Does not incorporate a consideration of current demand conditions; Is unreliable for finding the profit-maximizing price and quantity

Declining block pricing occurs when ______.

Firms offer quantity discounts over successive blocks of quantities purchased

_____ occurs when each unit of the product is sold for the maximum price each consumer is willing to pay.

First-degree price discrimination

Firms that engage in second-degree price discrimination know only that customers who purchase small amounts have _____ while people who buy large amounts have _____.

High marginal valuations; low marginal valuations

Firms that engage in second-degree price discrimination charge _____ prices to consumers who buy small quantities as to consumers who buy large quantities.

Higher

When setting two-part pricing for consumers who are identical, the usage fee should be set at _____.

Marginal cost

When setting two-part pricing for two groups of consumers with different demand, the usage fee should be set where _____.

Marginal revenue equals marginal cost

For a multi-product firm, profit maximization occurs where ______.

Marginal revenue equals marginal cost for each products

The conditions required for effective price discrimination include _____.

Market power, different demand elasticities between markets, and restricted ability to resell

Select all that apply: The conditions required to engage in price discrimination include _____.

Market power; Ability to identify sub-markets with different demand curves; No resale between sub-markets

The practice of charging different prices for the same product for the purpose of capturing consumer surplus is _____.

Price discrimination

_____ occurs when a firm offers lower prices for larger quantities purchased.

Second-degree price discrimination

Select all that apply: Practical problems with cost-plus pricing include _____.

Selecting an appropriate mark-up; Determining average total cost

The price in each submarket served by a third-degree price-discrimination firm will be determined by _____.

The demand curve in that submarket

A profit-maximizing third-degree price discrimination firm will sell the quantity of output at which _____.

The marginal revenues in each submarket are equal and equal to marginal cost of the firm

The third-degree price discriminating manager will maximize total revenue from sales of her product by ensuring that the marginal revenue in the less elastic submarket is _____ the marginal revenue in the more elastic submarket.

The same as

_____ occurs when the firm can separate the market into two or more submarkets and charge a different price in each submarket.

Third-degree price discrimination

_____ occurs when each unit of the product is sold for the same after an access fee is paid.

Two-part pricing

Charging the same price for every unit of the product sold is _____.

Uniform pricing